Rebuilding Your Credit After A Divorce

Rebuilding Your Credit After A Divorce

January 04, 2022
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The process of rebuilding your credit can take months or even years following a divorce, but it can also be an important step in rebuilding your life.

For many, the ways divorce impacts your finances can be crippling, and it’s not uncommon for people to fall behind on debt payments or even file bankruptcy because they simply can’t afford to get by anymore.

Dealing with both a divorce decree and your credit can be particularly difficult because if your financial situation has taken a hit, your credit score is likely to as well. Fortunately, there are ways to rebound and boost your credit score, making it easier to get back on your feet.

How to rebuild your credit after divorce

1. Assess the damage

Knowing where you stand is the most important thing you can do to start your journey to rebuilding your credit after divorce. Without understanding where to focus your efforts, you may miss some important steps.

Start by checking your credit score, which you can do for free with many services. You can get free access to your FICO credit score; the score that’s most widely used by lenders in lending decisions. You may also have access to your FICO score through your bank, credit union, or some lenders.

Although your credit score is an indicator of your overall financial health and creditworthiness, you’ll also want to dig a little deeper and check your credit reports to see exactly what’s impacting your score. You can access each for free every 12 months by going to

Print out your credit reports and review each one to determine which areas or issues you need to address.

2. Consider working with a Financial Advisor

Financial Advisors can act as a lifeline for people who are in debt and their credit scores have taken a significant dive. Although you may not be able to fix everything, a financial advisor can help you identify and dispute inaccurate, unfair, and unsubstantiated information on your credit report.

Of course, you can go through this process on your own for free. But if you feel as though your life is in shambles, and dealing with the divorce process has been enough, outsourcing this process could be the right move for you.

3. Learn how the credit system works

It’s not possible to understand perfectly how your credit score is calculated. No one except the people who create and program the formulation for your credit score knows exactly how scores are calculated.

However, there are a lot of things that can be known, and it’s possible to maximize your knowledge of those aspects for your own benefit. For example, here are the five primary factors that affect your FICO credit score in order of importance:

  • Payment history
  • Amounts owed
  • Length of credit history
  • Credit mix
  • New credit

We also know that high credit card balances can drop your credit significantly, and some of the newer FICO scoring models don’t include paid collection accounts in your credit score.

Take some time to research and learn about how credit scores work and how your actions can have a direct impact on your score. This process can take time, but it can give you the confidence you need to make the right decisions to improve your credit history. It can also help you understand exactly what you need to do to address your particular situation.

4. Open new accounts to add positive information

Most negative items on your credit report will remain on it for up to seven years, and some can last as long as 10 years. If they’re legitimate, there’s likely nothing you can do to get them removed. But the impact of those negative items can diminish over time, especially if you’re developing positive credit habits.

It can be challenging to find lenders willing to let you open new individual accounts if you have bad credit, especially if you’ve filed bankruptcy. Secured credit cards may be your best bet to start. Although the credit card company will require an upfront security deposit, you’ll typically get it back when you close the account, or even sooner than that.

Whatever you do, avoid credit cards for bad credit from issuers that charge exorbitant fees and interest rates. These cards promise easy approval, but there are plenty of lower-cost options available, even if your credit is especially bad.

Use your new accounts regularly and make your payments on time (and in full to avoid interest payments). As you create a history without missed payments or late payments, you’ll have the chance to open credit accounts with more favorable terms. Also, make sure to make on-time payments on all your existing accounts, including credit card debt, auto loans, student loans, and mortgage loans, if applicable.

Also, if you have a family member who has a credit card with a good payment history, consider asking them to add you as an authorized user on the account. Even if you never use the card you’ll receive in your name, the entire history of the account will be added to your credit reports, which can help boost your score — as long as the account holder also has a good credit history.

5. Pay Down Debt

If you’ve missed a payment, you’ll have 30 days to get caught up before that info gets passed on to the credit reporting bureaus. Once the damage is done, you may not be able to reverse it. But the longer you let an account go unpaid, the more it will hurt your credit score.

As a result, it’s a good idea to make it a goal to get caught up on your past-due payments as quickly as possible. Although you may not see a huge bump in your credit score because of it, it’ll help you stop the bleeding so your future efforts will have more of a positive impact.

Also, work to pay down your credit card balances. Your credit utilization rate — the percentage of your available credit you’re using at any given time — is an important element of your amounts owed. Reducing your balances can have a significant positive impact on your score.

Both of these steps can take some time, especially if you’re strapped for cash. If you have the time and capacity, look for opportunities to earn extra money to achieve these goals.

6. Again, ask for help

If you’re in a dire situation and you’re not sure what to do, don’t be afraid to ask for help. Financial Advisors typically offer free consultations. A financial advisor can help you figure out how to manage your money more effectively and improve your credit.

Depending on your situation, a financial advisor may also be able to help you get on a debt-management plan, which may include helping you lower your interest rates and monthly payments.

It can be difficult and even embarrassing to ask for help, but if it helps you dig yourself out of a personal finance crisis, it could save you years worth of hard work.

7. Continue monitoring your credit score

Throughout the process of rebuilding your credit, it’s crucial to keep track of your progress by periodically checking on your credit score and reports. 

The primary benefit of monitoring your credit while rebuilding it is it helps you understand which actions have the biggest positive impact on your score. It also helps you stay on top of new developments that could potentially hamper your progress so you can address them before they get out of control.

It’ll also help you spot potential fraud or identity theft perpetrated by a stranger or even your former spouse, giving you the chance to report it before it causes any damage.

The bottom line

Divorce and credit are just one more thing people going through an already difficult process have to deal with. If you’re not careful, letting your credit score drop can have long-lasting consequences. Fortunately, no matter where your credit stands after the divorce proceedings have ended, there’s a light at the end of the tunnel.

Don’t expect to reach your ultimate destination overnight, but the sooner you decide to sit down with a financial professional to create a thoughtful financial plan, the smoother and more focused your journey will likely be — no matter what life throws your way.